So 75 per cent of advisers are wary of equity release (July 29).
Could it possibly be because these advisers know these are products only to be suggested in the most desperate of circumstances and are the biggest rip-off in financial services has yet to receive the full light of day.
Look at the charges – some of which are hidden. Commission is still paid – outrageous or what? Even worse, rebating the commission does not result in better terms.
Lifetime mortgages are the worst option and regrettably the most common. You do not have to live that long before the property is no longer yours at all. Shared equity is a little better as at least the provider is there to share the pain when prices slide (as they have in London).
Either way, the amount advanced against value is for most as useful as a chocolate teapot. In most cases, trading down will yield a better return – particularly in better-off areas where £1m properties are not uncommon.
Harry Katz
HA7 Consulting
DB advice – who needs it?
I read with interest your article regarding the Financial Conduct Authority’s new consultation (July 30).
Personally, I agree with the ban (for the majority of cases) as I have always charged an up-front fee for advice rather than contingent charging.
My rate of recommendation to transfer out is very low, soI have always got paid for the work.
This said, is the FCA missing a very important point?
It states too many advised cases have a recommendation to transfer out.
Maybe this is too high if you look at just the number of advised cases, but what percentage of the total defined benefit plans is this?
It could well be just 10 per cent of people with a DB obtain advice; the other 90 per cent already know they have a good solution in place.
In my experience, I only get clients asking for advice when they already have a reason for considering a transfer.
Martin Coggins
MC Financial
FCA flogging a dead horse
Regarding your piece on DB transfers contingent charging (July 30), I don’t see why the FCA is bothering.
The DB transfer market is now virtually dead, due to the PI insurance premiums and additional restrictions.
The “insistent clients” - that is, those who wish to cash in their pensions for their own personal reasons, such as to pay off debt or have health issues - will likely not be in a position to pay for adviser fees with their own funds.
This is the FCA pandering to the likes of Frank Field MP. In my opinion, the FCA are wasting their energy and resources on something that is terminally ill anyway.
Clive Farrell
Galleon Wealth Management
Clueless on contingency
How far removed from reality is the FCA? I have concerns about the proposed ban on contingent charging (July 30).
While the FCA says companies can make a profit on relatively low fees, I strongly suspect that those ones are in the fortunate position of having a contract with major DB schemes to give advice on safeguarded benefits. If Mike Lacey Mega Global plc had an annual fee of £250,000 to advise Super Big Employer plc, I could quite easily charge £1,000 per individual, and be nicely profitable, thank you.
However, if I were being cynical, I would wonder if a major practice would incentivise their pension transfer specialists to recommend the vast majority of clients stay put. This would keep the FCA happy, regardless of client need; it would reduce downstream costs as there is no need for post-advice administration, and professional indemnity exposure is minimised.
A company advising on a transfer of a million pounds has 10 times the contingent liability it would have on a transfer of £100,000. If the Financial Ombudsman Service finds against a case in future, it will not cap the redress due because the advice fee was capped. It will want proper restitution and, the higher the cash-equivalent transfer value, the greater that will be. PI costs are based on quanta, not costs.
If smaller practices are forced to withdraw, the industry will be faced with a virtual monopoly, with advice given by a few larger companies. The number of advisers to discuss transfers with will fall, which cannot be to the advantage of potential clients.
One solution would be to charge for two events. The first would be a fee to advise – whether to transfer and the second for the transaction.
Banning contingent charging will result in less client choice, an advice slanted towards “stay”, regardless of need, and a near monopoly on advice.
Bowman Pension Consulting has no dog in this fight as we do not offer advice on this area.
Mike Lacey
Bowman Pension Consulting LLP
Trustees undermined
Regarding the regulator’s warning about the ‘unacceptable’ behaviour of small schemes (August 1), the problem with small schemes is not always the trustees.
Having taken on a small scheme to help the trustees wind up the plan, I found the insurer: has never provided information to enable the accounts to be drafted; has given no support to the trustees concerning their duties; has refused to provide a copy of the policy; does not hold sufficient common data; and, on top of that, does not have a record of the scheme when you telephone.
Just to compound my frustration, they do not provide telephone numbers when they write letters and will not deal by email. Is it any wonder why trustees are not fulfilling their duties?
Andrew Cheeseman
PAN Trustees
